Staff costs pummel PR profits

City PR firms have seen profit margins slump to their lowest level in seven years as income fails to keep pace with soaring staff costs.

Operating profits at the top 40 agencies in financial and consumer PR crashed by an average of 12% last year, according to a new survey by the accountants Kingston Smith for PR Week magazine.

Half of all firms saw their profits fall while six went into the red. Gross income rose by nearly 5%, but wage bills jumped at almost twice that rate at 9.3%.

Kingston Smith warned staff costs were worryingly high as they hit a record 62% of gross income.

PR Week editor-in-chief Danny Rogers said: "Many PR firms have become too sanguine about their wage bills."

Two big groups, Huntsworth and Chime, have slashed their costs in recent weeks.